We're now going to move on to discuss ADR, Alternative Dispute Resolution Concepts. This is a general introduction and look at concepts. And then later on we're going to look in-depth at the two key building blocks of ADR which are arbitration and mediation. So in this segment, I first of all want to give you an example of a form of mediation. And then, we'll look at an example, of a form of arbitration. But the basic message here is that, you can start with the two building blocks, that we'll explore later on. But you can be as creative as you want to be, in developing variations on the two basic themes. So I'll start with mediation. And the example I'd like to give you is called a mini trial, but again there are a lot of variations on the basic mediation theme. So here's the example, let's take a look at an actual mini trial. This was one of the very first mini-trials ever involved in intellectual property dispute between Telecredit and TRW. And this case is typical of a lot of litigation. The two parties fought over intellectual property. There was a $6 million claim. The parties spent $500,000. In the early years of the litigation. They exchanged 100,000 documents. The case sat in court for three years. Nothing was happening. And so finally, the Executive Vice President of TRW, and the President of Telecredit got on the phone. And basically ask you know, why have we outsourced this dispute to the court system? Why have we outsourced it to lawyers? We deal with business problems all the time. Why don't we get together and just resolve this dispute? And so they came up with a structured negation which later came to be known as a mini trial. And fundamentally there were five people at this structured negation. There was the executive vice president of TRW, the president of Telecredit. They each brought an attorney. And then there was a neutral party, an expert on intellectual property, who could answer any technical questions that arose during this negotiation. So, they began on day one. With the attorney, one of the attorneys, lets say the attorney for Telecredit standing up in front of the two executives and explaining her case. And then the executives ask her questions, if there are technical issues they refer them to the intellectual property expert and that attorney. Sat down. And then let's say the attorney for TRW got up. And again, had about a half day to present the case, answer questions, technical questions go to the expert, that person sits down. The two executives then go off into a room by themselves. For one half hour and settle the dispute. Estimated savings and legal fees, $1 million. But think about the benefits beyond those dollars savings. For one, this procedure gave each executive a chance to hear the case as described by the opposing attorney. And that description might sound quite a bit different from the story that they get from their own attorney. Second, they're able to come up with a resolution in a case that makes sense from a business perspective. When you're in court, litigation is a zero-sum game. One person's going to win 6 million, one person's going to lose 6 million. But when you negotiate a settlement and somebody in business. Then you can come up with something that preserves the business relationship. So that's a quick example of a form of mediation. Again, you can come up with as many varieties as, as you want. Let's now move on to arbitration and an example of a variation on the arbitration theme this example is called Rent-A-Judge. Now, this is not the same as the buy a judge program that has been used in Chicago and other emerging economies for many years. Just kidding. With Rent-A-Judge, you actually hire a retired judge to hear the case. And so an example, we've got a couple of former roommates who are involved in a dispute. Brad and Jennifer. Jennifer is especially upset because Brad now has a, a new roommate called Angolie. So they're involved in litigation, Brad Pitt and Jennifer Aniston. And rather than go to court they used the rent a judge procedure. They hire, hire a retired judge to hear the dispute. Now, one of the advantages for Brad. And Jennifer and using this retired judge. And, and what would be the advantages for you if you are in a business dispute. Think about that for a second, hit pause if you want. Write down the advantages that you can think of in using in this form of arbitration or other forms of arbitration. Here are, here are some items that might be on your list of advantages. Number one, it might be a lot quicker than sitting for years in the court system waiting for your case to arise. Number two, it might be cheaper although we're going to discuss that issue later. Number three and this is a big one for Brad and Jennifer, but also for your business. You want to keep the dispute out of the newspapers you want to keep this private. One way to think about arbitration is that it is a type of litigation, but it's private litigation. And finally, unlike the regular court system, you get to pick the judge. When you're in the regular court system. The selection of the judge is pretty random. You might end up with a judge who has never handled a business case, who has no idea what's going on. In the type of business dispute that you're involved with. With Rent-A-Judge you can pick somebody who's an expert. In the particular area that is in dispute. So, lots, lots of advantages to using that form of ADR. One additional point, and this is something we've, we talked about earlier when we had the brief introduction to ADR. The beginning of the course. And that is the ADR processes which are arbitration, mediation, and negotiation can be used not only for dispute resolution. But also for doing deals and this has been a dramatic change. Over the last ten years or so where many more third parties are involved not only in resolving disputes but also in making deals. Here are some results of a recent survey of mediators. 40% of the mediators were involved in deal making, the deals they were involved in range from 100,000 to 26 million. And here you have some examples of the types of deals that where the negotiators brought in third parties. You can use not only mediation, of course, but also arbitration. One area in the United States where arbitration has been used for several years is in professional sports. Especially baseball. So here's an example of baseball arbitration. We've got a pitcher by the name of Roger Clemens who retired. And then he came out of retirement to pitch for Houston and they paid him $5 million. Well, as it turned out he had a great year. He was named the best pitcher in the league, won the Cy Young award. So when it came time to negotiate his salary for the next year, Houston asked Roger, well what do you want to be paid? And he wanted something a little bit higher than 5 million. He basically looked at the number on his uniform and that said 22. So he said, well, you know, I want 22 million. Houston countered with an offer of 13.5. Now this is the kind of dispute that often goes to arbitration. This is the kind of negotiation that often goes to arbitration although in this case they settled. But in baseball they use a unique form of arbitration that you could also use. And that is, rather than having the arbitrator select the salary, each side privately submits a number to the arbitrator. And then the arbitrator has to pick one of those two numbers. So for example if you were working for the Houston baseball club, what number would you submit, again privately, to the arbitrator. Think about that for a second. What number would you submit? Logically, you should have picked a number that was larger than 13.5. You want to pick a number that you hope will be reasonable to the arbitrator, which will be somewhere between 22 and 13.5. You don't want to lock in on 13.5, because if, if Roger budges, if he, say, changes from 22 to 20, then the arbitrator might select that number. So you, you want to pick a reasonable number, that the arbitrator will select. And so it's going to force both parties to come in with numbers that are, that are closer to the middle and more reasonable. So that concludes our look at ADR concepts.
